Guangzhou Covid-19: China blocks key transport hub; markets fear the economic fallout

Hong Kong
CNN Business

China has closed a major transportation hub in the South as the country grapples with its largest nationwide Covid outbreak since April.

The lockdown also follows a surge in cases in Beijing, which reported the country’s first Covid deaths in nearly six months.

In recent days, China had begun to ease its tough Covid restrictions, which had paralyzed local and international businesses for months. But experts are worried that Beijing’s resolve to reopen the country is now weakening as cases rise again.

Asian markets and oil prices fell on Monday as investors fretted over the prospect of China tightening its Covid rules again. The Hang Seng Index (HSI) fell as much as 3.4% in the morning. It closed up 1.9%. The Shanghai Composite Index of mainland China lost 0.4%.

Oil prices also fell, with US crude futures down 0.4% on Monday in Asian time. Brent crude, the global oil benchmark, fell 0.6%.

Guangzhou, one of China’s largest cities with nearly 19 million residents, imposed a five-day lockdown in Baiyun District, home to one of the country’s busiest airports. Baiyun is also the most populous district in Guangzhou, with 3.7 million people.

Schools will be closed, public transport services will be suspended and residents are advised to stay at home, according to a statement released by the Baiyun district government on WeChat on Monday.

The lockdown comes as Guangzhou struggles to contain the worst Covid outbreak in three years. Guangzhou reported 8,181 cases on Sunday, bringing its total number of infections to more than 80,000 since October 22.

There are growing fears that cities will once again stagnate in the world’s second largest economy. From Guangzhou in the south to Zhengzhou in the central region, rising cases have forced local governments to step up lockdowns in recent days. China reported 26,824 new cases nationwide on Sunday.

Beijing, the country’s capital, recorded three deaths from Covid over the weekend. The city’s Haidian district has canceled face-to-face classes, according to a statement from the district government on Sunday.

Shijiazhuang, the largest city in northern Hebei province, also reimposed a five-day lockdown from Monday, just days after significantly easing Covid rules.

The latest outbreaks could hamper China to unwind from its nearly three-year “zero-Covid” policy.

On November 11, the central government eased some of its strict Covid restrictions. The move fueled hopes that China would move away from its draconian zero-tolerance approach, which had crippled its economy and largely isolated the country from the rest of the world in recent years.

Markets rallied after the move, with Hong Kong’s Hang Seng index up a combined 14% in three sessions and entering a technical bull market last Tuesday.

But the new lockdowns hurt market sentiment on Monday.

“The big driver of the rapid downward momentum is growing uneasiness that China will not loosen its Covid lockdown policies as infections rise again,” said Stephen Innes, managing partner at SPI Asset Management.

Analysts at Goldman Sachs said the latest news about China’s handling of Covid has been “confusing” for investors.

“Our main message is that the first stage of the reopening may be messy and bumpy, while the rebound after the initial hurdle could be very strong,” they added, expecting China’s GDP growth to accelerate from 3% in 2022 to 4.5% in 2023.

— CNN’s Beijing bureau contributed reporting.

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